PS3 for $399 to Drive ‘Significant Traffic’ for GameStop.
Posted by GCN Sean Foster on November 5, 2007
Great news for Sony… Leading retailer GameStop continues to benefit from the booming game industry and Michael Pachter thinks the new $399 PS3 will help drive even more foot traffic.
Ahead of video game retailer GameStop’s third quarter fiscal results (expected the week of November 19), Wedbush Morgan Securities analyst Michael Pachter has raised his revenue estimates for Q3 and the full year based on the video game sector’s strong performance. He now expects GameStop to post Q3 revenues of $1.476 billion (up from $1.4 billion) and full-year revenues of $6.986 billion (up from $6.703 billion).He’s also raised his FY:08 estimates for revenue to $7.381 billion from $6.989 billion. Pachter has raised his 12-month price target from $55 to $69 and is maintaining a “Buy” rating on the stock.
Along with Halo 3—Pachter estimates GameStop sold 1.5 million units in October—and other big titles, Pachter believes Sony’s recent introduction of the cheaper $399 40GB PS3 will lead to another boost for the retailer.
“GameStop shares are trading at around 28x next year’s consensus EPS estimate of $1.99. We think that this figure is too low, given that the company will sell a huge lineup of ‘must have’ titles coming out in early 2008, and that the price wars between the console manufacturers have just begun to heat up. We expect the company to deliver a 38.5% comp in October due to the launch of Halo 3, accompanied by price cuts for the Xbox 360. We also expect a 20% comp in the January 2008 quarter due to the introduction of a new $399 PS3, which should drive a significant amount of traffic GameStop’s way this holiday,” he said.
“The shift of GTA IV along with other top titles expected next year (such as Gran Turismo HD, Metal Gear Solid 4, LittleBigPlanet, and Final Fantasy XIII) should provide an opportunity for GameStop to deliver double-digit comps through the April 2008 quarter, and we are revising our April comp estimate to 13%, reflecting very high expected software sales growth during that quarter.”
Pachter also noted that he thinks in the April 2008 quarter a price cut for the PS2 is likely, and a price cut for the Xbox 360 is “possible.”
